RETAIL ORGANIZATIONS – Advantages and Disadvantages

RETAIL ORGANIZATIONS – ADVANTAGES AND DISADVANTAGES

ADVANTAGES OF SMALL RETAIL ORGANIZATIONS

These types of outlets appeal to people with lean resources and offer the following advantages

1. Location: – They can easily be located at places which are convenient for both the retailers and the buyers. This advantage derives from their size.
2. Personal contact: – Small retail outlets create avenue for the effective interaction between the retailers and the buyers. Being mostly neighbourhood stores, both sellers and buyers know themselves and can easily exchange pleasantries.
3. Motivation to work: The owners are usually independent retailers who depend on their stores for livelihood. They regard the store as a part of them and are strongly motivated to work for the success of the stores. The retailers appreciate that they well fall or rise in status with the operations of the stores. This accounts for long operating hours of most of these stores without any grudge by their owners.
4. Job opportunity: Small retail outlets require little amount of money to take off. This has encouraged many jobless people to start on their own.

DISADVANTAGES OF SMALL RETAIL ORGANIZATIONS

The disadvantages associated with small retail outlets can be examined by looking at their scope of operation. By their nature, the scope of operation is usually narrow. The immediate implications are that such retail outlets lack the financial resources, and manpower required for the efficient management of a business.

Lack of financial resources makes expansion difficult. The retailer under such a situation cannot take opportunity of low prices, cash and quantity discounts. Retail outlets under consideration are usually small and qualified hands will neither accept to work in them nor will their owners make attempts at recruiting them. This accounts for why they remain as one-man business for a long time. There are, however, few small retail outlets whose owners have strived in elevating both their status and capital base.

ADVANTAGE OF LARGE SCALE RETAIL ORGANIZATIONS

Large retail organizations command relatively huge financial resources and this enable them to increase their capital base. The advantages they have arisen from this capital base are:

1. Buying power: These retail organizations have the capital and even can afford to buy large quantities of goods at a given time. They are therefore regarded as “valued customers”. This entitles them to reasonable trade, quantity and cash discounts.
2. Division of labour: As large retail organizations they need specialist hands to negotiate their purchases, to handle their accounting system, to supervise sales etc. the engagement of these experts makes for division of labour with its attendant benefits.
3. Access to Capital: In business, the biblical saying that “to those who have, more will be added onto them” is very true. Small retail outlets cannot have access to easy capital because their capital base is small and no security to use for a loan. But large retail organizations have strong capital base and good security which enable them to borrow from the financial institutions very easily. They can also attract credit facilities faster from their customers.
4. Distribution: These retail organizations buy in large quantities which mean that they can move their goods in car load quantity. This reduces the cost of transportation. In addition, they have their own warehouses and thereby minimize the storage costs.
5. Prestige: – Large retail organization, like Kingsway, leventis, etc. have imposing stores, good layout, attractively displayed shelves, etc. which have combined to give them prestigious image within the society. Customers have high opinion of such stores and they make sure they dress well while going to shop in them.
6. Research and experiment: Given their financial base, they are in a very good position to research and carryout experiments on new methods of retailing.

DISADVANTAGES OF LARGE SCALE RETAIL ORGANIZATIONS

These disadvantages derive from the large size of these organizations. They include lack of personal contact, complex supervision, high overhead costs and problem of adjustments.